The trouble with the ‘return JobKeeper’ push

JobKeeper kept many people out of Centrelink queues like this. Picture: AFP

Scott Morrison is clearly setting up an agenda to go to the polls on four main issues - Covid vaccination success; national security and the nuclear submarine deal with US; clear climate credentials and a massive improvement in the small business environment led by a proper tax appeal system and faster customer payments.

But there is another issue - the return of JobKeeper monies by large corporations - that is being fanned by the combination of parts of the conventional and social media which appears to be gaining popular traction.

On the surface, a reversal of JobKeeper rules would be the most blatant exercise in retrospective taxation that we have seen for decades and would normally fizzle out.

But a number of Liberal party backbenchers have expressed a desire for some of the money to be returned and to ignore the retrospective taxation involved. They would not make what appear to be outlandish statements if they didn’t detect in their electorate a rising groundswell of opinion on this front.

This is not like Labor’s proposed retiree and pensioners tax, where in the last election the ALP targeted the franking credits of selected groups of low and medium income people, particularly retirees. They avoided impacting the rich. On this issue the ALP received a well deserved electoral drubbing.

If the JobKeeper money return issue continues to gather momentum then the ALP will be very tempted to take a risk and to set out some retrospective taxation rules that can be made to look very popular under the slogan that companies and organisations are returning money they did not need.

At the moment the opinion polls, the electoral redistribution and the fact that the Coalition has had three terms of office has made the ALP the clear favourite to win the next election.

Companies need to be ready for a money exodus.

Treasurer Josh Frydenberg has declined to force profitable companies to return JobKeeper payments. Picture: Martin Ollman

The base JobKeeper criteria are worth recalling. in April 2020 Treasurer Josh Frydenberg set out these rules:

* Eligible employers had to pay eligible employees a minimum of $1500 from March 30, 2020 to be eligible for the JobKeeper payment. This was an unusual tax concession that started with staff retention, hence its name. Vast numbers of people who were set to be stood down back in March/April 2020 kept their employment. Some employees actually received higher than their then current payments.

* If they kept their staff, employers were eligible if, at the time of applying, they estimated that their turnover had fallen (or was likely to fall) by at least 30 per cent The qualifying period could be a month from March 2020 to September 2020 compared to the same month in 2019, or a quarterly period. Enterprises with turnover over $1bn had to record 50 per cent turnover falls.

* Those who made turnover decline estimates that proved to be wrong had to return the money. The ATO estimates that about $13bn of the $90nm payout went to firms that did not meet the criteria in the scheme’s first three months, but the vast majority of applicants were eligible and met the staff retention and turnover criteria.

The retention of those jobs had an impact on the community beyond any predictions. Starting in late April 2020 and in the months that followed a great many businesses, particularly those involved in appliances and building, began to see a turnover surge. Results in the months that followed for those enterprises enjoying the upthrust were often much better than expected.

Some estimates have one fifth of the major listed companies who received a JobKeeper entitlement lifting profits during the 2020 pandemic. Some returned money they received.

This momentum was expected to continue in 2021 and Australia looked set for a widespread recovery until it was hit with the Delta strain. During 2021 enterprises that thrived in 2020 have often experienced trading below expectations. Many of those that were hit in 2020 have been unable to survive a double blow.

If the ALP believes that this is an issue where it can gain popular appeal then before the election it will need to set out rules for the retrospective taxation to be imposed.

Where would you start? Would you look at turnover in the months that followed the JobKeeper criteria or would you take a whole year? How would you account for seasonal variations? Will retrospectivity be directed only at large corporations or should we go all the way down the line to local enterprises?

And of course many enterprises have spent the money and in the current much tougher times will now be asked to borrow from their bank to repay it.

But in the populist media and among large parts of the community - particularly those who believe their income is safe - that really wouldn’t matter. But never again will companies rely on taxation concessions by a government because after the election they may be retrospectively reversed.

The best recent example of how this sort of action can impact enterprises is when the Gillard Labor government handed out clearly defined research grants to unsuspecting companies.

The Australian Taxation Office didn’t like the way the money was distributed by the government and some years later tried to claw it back with penalties and interest. Research leaders who had spent the money were sent the wall. Australian research was set back 10 years

In some instances oppositions have warned that they will change legislation if they gain government, but with JobKeeper no such warning was delivered.